It's nearly as important -- and can be just as awkward -- as that other talk parents give their kids.

Many wealthy people struggle to talk to their children about how much money they have. What if they divulge too much and the kids blab about it on social media? What if they share too little and the children are overwhelmed by an inheritance?

A 2015 T. Rowe Price study of 1,000 parents found that 72% had at least some reluctance to talk to their kids about money. Most of those parents wished there were more resources to teach their children about personal finance.

This is a great time for families to initiate these conversations, since there may be more of a captive audience in the dog days of summer than during the school year.

Financial advisers can help create a years-long plan to teach children where their family’s wealth came from, how it supports the family’s values and how it will be sustained. Often, the key number – parents’ actual net worth – is not revealed.

When kids are as young as 6, parents and advisers can start by helping them identify bills and coins and understand the purpose of money, said Nathan Dungan, president of Minneapolis-based Share, Save, Spend LLC, which helps people link financial decisions to their values.

When kids are a few years older, parents should help them understand utility bills and set savings goals.

Parents can help kids understand where the family’s money comes from by researching genealogy and talking to older generations.

Sandra McPeak, a Rolling Hills Estates, California-based wealth manager with Wells Fargo Advisors, said one of her clients took his teenagers to visit rental properties he wants to invest in and discussed cash flow and expenses. Another client who owned a factory had her daughter assemble textiles and do odd jobs there during the summer. That daughter now runs her own sports clothing line.

Parents can communicate their values during these outings, discussing how they treat employees. They can also take children on tours of their favorite charities.

Advisers should include their clients’ children in meetings, explaining to them: “Your parents have amassed a certain amount of wealth because they’re very thoughtful in the choices they make with their money,” Dungan said.

Advisers can help parents teach kids about personal finance basics, like stocks, bonds and mutual funds, and how compound interest and inflation affects returns.

The goal is for kids to explore what it means to be wealthy, instead of simply asking if the family is rich, Dungan said.

If parents do not control this conversation, kids will find out information about their wealth in haphazard ways.

Dungan said kids use Zillow.com to check out the value of their homes. Others set up Google alerts so they can use U.S. Securities and Exchange Commission filings to see what their parents make.

The official rules may say one thing, but heirs usually have options.

What would you do if you knew you had a potentially valuable asset that could vanish upon your death? Your bank account, empty. Your antique car, gone. Your grandmother’s jewelry, evaporated.

Globe-trotters appear to have that problem: Many airlines say officially that frequent flier miles are not your property and cannot be willed to your heirs upon your death.

“It is a big problem, because people accumulate lots of miles that they don’t use, and the policies of the different airlines are different,” says Gerry Beyer, a law professor at Texas Tech University School of Law. “They’re constantly shifting the policy, and sometimes it depends upon who you talk to and what you can get done.”

Frequent flier miles pose a bigger problem for estates than other loyalty programs because heavy travelers and rewards-card wizards can accumulate many hundreds of thousands (or even millions) of miles, Beyer says. And that adds up: By one estimate, 500,000 miles could be worth between $4,000 and $10,000, depending on the airline.

But can you pass your miles on? That depends. The secret is: Don’t take an airline’s written policy at face value. The terms of service often say one thing while the carrier’s practices offer another path.

Get the Paperwork

For example, American Airlines’ AAdvantage program terms and conditions say, “Neither accrued mileage, nor award tickets, nor upgrades are transferable by the member upon death.” That seems pretty clear.

But if you read on, you’ll see that the airline reserves the right to decide, “in its sole discretion,” to pass your miles on to beneficiaries “upon receipt of documentation satisfactory to American Airlines and upon payment of any applicable fees.”

American Airlines spokeswoman Laura Nedbal clarified that the airline does indeed transfer mileage to heirs. How it works: Upon request, American Airlines provides a special affidavit form for beneficiaries to sign, affirming that they are the rightful recipients of the miles. Your heirs will need to complete it and send that back, along with the death certificate. Happily, as of now, there are no mileage transfer fees.

Similarly, United has a procedure for transferring miles — but you have to know to ask about it. The MileagePlus program rules say mileage may not be transferred, except as “expressly permitted by United.”

Spokeswoman Karen May says the airline has made “case-by-case exceptions” when members have died. Should your heirs apply for one of those exceptions, they would need to send the death certificate, a signed and notarized affidavit provided by United, and a $150 mileage transfer fee, May says.

Ask Nicely

Smaller carriers don’t always have paperwork ready for heirs to sign, but they might have luck if they just ask nicely.

For instance, Virgin America’s Elevate Reward Points credit card program rules say points “may not be transferred upon death.” But although the small airline doesn’t receive that many requests to bequeath points, says spokesman Dave Arnold, he confirms that the airline does make “case-by-case” exceptions to its rules when heirs provide documentation of a bequest.

Even if you can’t pass on your miles, you can leave your username and password behind. At Southwest Airlines, for instance, you can’t will your miles to heirs — but the Rapid Rewards program rules say your points will live on in your account 24 months after your last account activity. During that time, if your heirs have your account information, they can go into your account and use the miles, or transfer them for a fee of about 1 cent per mile, says spokesman Adam Rucker.

But tell that to Roberta Bekerman, a widow who wrote to Delta, “It is with great sadness that I inform you that my beloved husband, Philip, passed away on Dec. 21 … Please be so kind as to transfer his accrued SkyMiles into my account.” Delta did, the New York Times reports.

The Takeaway

You simply can’t guarantee that your spouse or kids will get your miles. “One of the biggest problems is the airlines change their policies so many times, even if you do everything perfect when you write the will, it might not work anymore,” Beyer says.

Still, there’s a good chance your airline will honor your request anyway. The best you can do is add a line to your will that says, “I leave [name of heir] my airline miles, if allowed,” Beyer suggests — and advise your children to be polite to the airline customer service reps. Either that or spend down your miles when you’re still alive; now’s the time to enjoy them.

My simple and reliable machine always did what I needed, so I saw no reason to upgrade to a fancier new model.

I learned to sew in high school, but I’d barely touched a needle and thread by the time I landed in Germany in 1983 as a 24-year-old American soldier. One day while shopping on the military base, I saw a Pfaff sewing machine for $300, almost half of a month’s pay. I decided on the spot to splurge. I hoped to take lessons from my grandmother, an avid quilter, when I returned to the States. Besides, I was getting married, and I figured a sewing machine might come in handy.

My husband was also a soldier, and when our first child was born in 1986, I left the Army to be a stay-at-home mom. Over the next eight years, whenever my husband received orders to a new duty station, the sewing machine shuttled along with us. With the arrival of two more babies, however, sewing took a backseat to motherhood.

It wasn’t until the summer of 1992 that I was able to visit my grandmother in Kentucky for a few days. After receiving those long-delayed lessons, I was confident enough to attempt my first quilt—an anniversary gift for my sister and brother-in-law. I loved turning a pile of fabric pieces into something beautiful and useful. Over the next few years, I made three more quilts as wedding gifts for friends.

Finally, after I had given away four quilts, it was time to keep one at home. I turned my husband’s well-worn rugby T-shirts into a quilt for his 60th birthday.

Whenever I purchased quilting material, I would admire the latest sewing machines in the fabric stores. All the fancy features were mind-boggling—as were the price tags. But my simple and reliable machine did what I needed, so I saw no reason to upgrade.

My frugal grandmother certainly would have approved. Unfortunately, she passed away, at 90, before I could get back to Kentucky to share my quilting stories with her. My family and I still wrap ourselves in her quilts on cold nights in Georgia, just as we did in Germany, New Hampshire, and all the other places we’ve lived. My next quilt—for me this time—is already in progress. More than 30 years ago, I invested $300 in a sewing machine that is still paying dividends of beauty, love—and warmth.

My family loves get-togethers—we find any reason to gather and eat. We credit this wonderful trait to my grandparents. They were gracious hosts with amazing culinary skills. Their home, built with my grandfather’s hands, was a sanctuary for family, friends, and welcome strangers.

My grandparents didn’t just leave legacy of memorable gatherings; they also left their home to their children, expecting regular family reunions after they were gone. My grandparents would not have it any other way!

My grandmother died in 1994, eight years after my grandfather’s death.

Their children tried their best to embrace my grandparents’ vision of maintaining the family home. But time, distance, and money wreaked havoc on implementing the plan. Our hearts sank as the house slowly fell into disrepair. It took almost 14 years before the children agreed that one sibling would buy out the other childrens’ shares of the home.

By then, however, the damage to the home was done. Now, only the land and memories remain.

I believe that if my grandparents had addressed certain questions about the house, they might have been able to protect it after their death with some thoughtful estate planning. Here are those questions:

Who wants to keep the home?

Who would prefer their inheritance to be cash instead?

Who can afford to buy the home?

How will the children handle multiple owners now? How would they handle ownership upon their own divorce or death?

Who will pay the property taxes?

Who will ensure upkeep?

One option might have been an estate-planning provision requiring the home be sold, with the first rights to buy given to the children. Or maybe the home could have been left to one or more children, and other assets left to other children to equalize inheritances. Maybe they could have established a trust in order to fund perpetual care of the home, and to manage generational ownership.

These considerations and others in the estate planning process might have allowed the children to preserve both their wealth and their legacy.

A significant amount of wealth is transferred through real estate. According to a 2014 study by Credit Suisse and Brandeis University’s Institute on Asset and Social Policy, the primary residence represents 31% of total assets for the top 5% of wealthy black families in the U.S. and 22% for the wealthiest white Americans. The percentage of wealth embodied in a primary residence is even greater for less well-off households.

Now it’s up to my aunts and uncles to get it right for the next generation. Will wealth be lost again or will it transfer for the benefit of their descendants? It’s a great question for the next family gathering…at a place to be determined.

———-

Lazetta Rainey Braxton is a certified financial planner and CEO of Financial Fountains. She assists individuals, families, and institutions with achieving financial well-being and contributing to the common good through financial planning and investment management services. She serves as president of the Association of African American Financial Advisors. Braxton holds an MBA in finance and entrepreneurship from the Wake Forest University Babcock Graduate School of Management and a BS in finance and international business from the University of Virginia.

New Common App for Colleges Goes Online This Weekend

This year's Common Application has some significant changes students should know about.

Summertime may still be in full swing, but rising high school seniors take note: College application season starts—unofficially—this weekend.

The Common Application, accepted by more than 600 colleges and universities, will be available on Saturday. Sixty-nine new colleges joined the nonprofit consortium of schools for the upcoming year.

The Common App was created more than three decades ago to simplify the application process by allowing students to answer a single core set of questions, including essays, for multiple colleges. Last year, 857,000 students submitted more than 3.7 million applications.

This year’s Common App has a number of changes. For example, not all colleges will require an essay and teacher recommendation in their application. Officials say the website will make clear which colleges require essays and that students will still have the option to submit essays to all colleges.

Applicants also will see a new writing prompt intended to make them demonstrate analytical reasoning and intellectual curiosity. The new essay asks students to describe a problem they’ve solved (or would like to solve) and how they went about doing it.

Although the application is common, the deadlines aren’t. Each school sets its own, but in general, regular admissions applications come due in January, and the Common App website tells you the deadline for each school you’re applying to.

Real estate agents typically charge a 4% to 6% commission on the sale price, so selling without an agent could certainly save you big bucks. Even after you pay $1,000 or so for your own online ads, open-house brochures, and a lawn sign, you would still probably clear an extra $14,000 on a $300,000 sale, $24,000 on a $500,000 sale, or $36,500 on a $750,000 sale.

And that’s not the only advantage to selling it yourself — a process often referred to as “for sale by owner,” or FSBO (pronounced “fizz-bo”). “You get to control the negotiation, rather than having it filtered through a middleman,” says Los Angeles real estate attorney Zachary Schorr.

While a good agent can certainly help with the negotiation process, he or she also has a vested interest in the transaction. “And closing the deal may in some cases be more important to the agent than getting you the absolute best price,” Schorr says. If you’re a good negotiator and can handle the process without emotion and with clear eyes, you might do better on your own.

You will need to write your own description of the house, take your own photos, and give your own tours to prospective buyers. “If you excel at these things — or if you’re a control freak like me — you may do a better job than some realtors would,” Schorr says.

The Downsides

Make no mistake, though: Working without an agent requires a huge investment of time, knowhow, and effort. You need a wide range of skills, from home staging to salesmanship to negotiating. And you need to be able to completely divorce yourself from the emotions that can arise when a buyer takes a dig at your curb appeal or lowballs the offer on the beloved home where you raised your family.

If these factors don’t dissuade you from attempting to sell it yourself, here is how Schorr suggests overcoming the three biggest challenges you’ll face:

Limited pool of buyers: Most serious house-hunters are working with a real estate agent; the commission would normally get split between the buyer’s and seller’s agents. But without a commission on the table, no agent is going to bring clients to see your house. In fact, many shoppers are contractually obligated to purchase their home through their agent — meaning even someone who finds your house while out on a drive or surfing the Internet may not easily be able to buy it.

If you don’t get any offers, Schorr suggests a compromise solution: State in big bold type in your online ads and your lawn sign that you will pay a 2.5% commission to the buyer’s agent. You’ll only save half as much in commission costs, but you’ll get a much bigger pool of potential buyers coming to look at your place.

Bargain hunters: Of course, some buyers may find you even without a buyer’s agent. “If you have a great house, in a sought-after neighborhood, and you’re on a busy road where you’ll get a lot of visibility, then you might do fine working with only the unsigned homebuyers who discover your house on their own,” says Schorr. If you’ve got a charmer with a great kitchen in an affordable price range, they’ll find it online no matter how far off the beaten path you are.

The trouble is that those buyers may seek to discount the purchase price: Because they know there are no agents involved, they may feel that they should benefit as well.

How should you handle that? It depends. If you’re in a great house that sells itself, stick to your target price. But if you’re thrilled to get an offer because you can’t stand showing the house anymore, split the commission savings and make a deal.

Lack of advice or tools: You may miss an agent’s help throughout the process, starting with when you set a listing price. Online price calculators may not be sufficient to determine the fair market value of your home because they use completed sales, which tend to lag the market by a few months. Also, the algorithms don’t necessarily account for factors like curb appeal, landscaping, recent renovations, or school district lines.

You may also want a lawyer to produce and review contract documents; some states actually require you to hire one. Although you can find much of the paperwork online, Schorr says, “you need to tailor it to your deal — and the way you fill it out is just as important as what the boilerplate language says.” You’ll probably pay $1,000 to $3,000, depending on the cost of living in your area, but you’ll get an experienced pro who’s in your corner and can make sure the deal gets done right.

Obviously, these solutions all can eat into your sell-it-yourself savings. So try going it on your own for several months.

If your house gets lots of attention and you get good offers, stay the course and be prepared to give up a little of your savings to close the deal. But if the process drags on without any real bites, hire an agent. You’ve lost nothing but time, and you’ll enter the agreement with a far better understanding of how it works and how to get the most from your agent.

Insurers swear their rates make total sense.

Your credit score is a number that indicates how likely you are to pay off debts, from credit card bills to mortgages and beyond. The number is based on one’s credit history, and understandably, these scores are used regularly by banks and landlords as a way of determining whether it’s a good idea to give an individual a loan, or an apartment lease.

Increasingly, and somewhat puzzlingly, credit scores are also being consulted by employers to help them figure out who to hire, and by insurers that set premium rates based partially on the scores. Auto insurance companies began using the scores in the mid-1990s, and it’s now commonplace for them to help determine rates. Only California, Hawaii, and Massachusetts have laws banning the use of credit scores as a factor for establishing car insurance rates.

What in the world does one’s credit history have to do with the likelihood of, say, getting into a car accident? The web insurer esurance admits on its site that using credit scores to determine auto insurance is “controversial.” But it claims that doing so is legitimate nonetheless:

While the reasons why are less than crystal clear, research shows that credit scores can accurately predict accident potential. Statistical analysis shows that those with higher credit scores tend to get into fewer accidents and cost insurance companies less than their lower-scoring counterparts.

While insurers acknowledge that credit scores play a role in whether premium rates are high, low, or somewhere in between, it’s largely impossible to tell how big the impact is. That’s why Consumer Reports decided it was worthwhile to launch an investigation and try to get to the bottom of this. “Over the past 15 years, insurers have made pricing considerably more complicated and confusing,” the report states. Because insurers aren’t exactly forthcoming in explaining how they come up with rates (shocking!), Consumer Reports researchers analyzed more than two billion auto insurance price quotes from 700 companies for hypothetical drivers all over the country.

The results, published in the September 2015 issue, are particularly alarming for drivers with poor credit scores—and even for those with scores that are good rather than excellent. “Our single drivers who had merely good scores paid $68 to $526 more per year, on average, than similar drivers with the best scores, depending on the state they called home,” the report states. Nationwide, drivers with good scores paid an average of $214 more annually than their neighbors with the best credit scores.

The impact of one’s driving and credit history on insurance varies widely from state to state. In Florida, for instance, a single adult driver with a clean record pays $3,826 annually for auto insruance, on average, if he has poor credit, or $2,417 more than a driver with a clean record with excellent credit ($1,409). Meanwhile, a driver with merely good credit would pay $1,721 annually, or $312 more than his counterpart with a top credit score.

Astonishingly, at times a poor credit score seems to have a larger influence on auto insurance rates than a drunk-driving conviction—which, one would think, is surely a strong indicator of the likelihood of getting into car accidents. In Florida, a driver with excellent credit and a DUI would pay an average of $2,274 per year for auto insurance, or $1,552 more than the driver with a clean record but a bad credit score.

Apparently, in the eyes of some insurers, the failure to pay off credit card bills is a worse offense than drunk driving.

Saving for College vs. Saving for Retirement: Why the Conventional Wisdom Is Wrong

In this special guest column, a college expert challenges some familiar financial advice for parents.

Financial advisers often tell parents that they should save for their own retirement first and their children’s college educations second. They support this advice with simplistic sound bites such as “You can borrow for college, but you can’t borrow for retirement.”

But I’ve done the math, and the experts are overstating the case. You end up with much more money in retirement if you set aside money for retirement and college when your kids are young than if you just put all your savings into retirement accounts.

Here’s why the experts are wrong:

First of all, you can borrow for retirement—through a reverse mortgage, although those have their downsides.

Secondly, just because you can borrow for your kids’ college (through federal Parent PLUS or private parent loans, for example) doesn’t mean you should. The interest rates on parent loans typically exceed what you’re likely to earn on savings, so paying for college out of savings is more financially advantageous to you in the long run.

Here’s the savings strategy that results in the highest total retirement savings:

Maximize the employer match on contributions to retirement plans, since that is free money.

Build an emergency fund with at least three (but preferably six) months’ living expenses.

Pay down all high-interest debts, such as credit cards.

Save for the child’s college education in a 529 savings plan. If you can manage it, aim for saving enough to cover at least one-third of future college costs. For a child born this year, that means saving $250 a month from birth for future enrollment in a public four-year college.

Save the rest in retirement plans. Again, if you can manage it, a good rule of thumb is to save a fifth of your income during your working career to pay for the last fifth of your life, in retirement.

Here’s why this strategy pays off in the long run. Consider two scenarios in which parents save $1,000 per month for 40 years in tax-advantaged accounts. Assume an average annual net return on investment of 4.9% on college and retirement savings and an interest rate of 7.9% on the parent education loans.

In the first scenario, the parents save $250 per month for college in a 529 savings plan for the first 17 years for college, and the rest for retirement.

In the second scenario, the parents save the full $1,000 for retirement for all 40 years and plan on borrowing the amount they would otherwise have saved for college. However, the loan payments will be deducted from the amount the parents would have saved for retirement, for a total of 10 years starting six months after the student graduates from college.

The first scenario yields $79,690 in college savings at the end of the 17-year period. Assuming that the parents use about a quarter of the money each year the student is in school and that the remaining college savings balance continues to earn a return while the student is in school, this covers a total of $86,234 in college costs. At the end of the 40-year period, the parents have saved $1,247,469 for retirement.

In the second scenario, the parents also spend a total of $86,234 to pay for college, but they borrow the money instead of saving it. With monthly interest capitalization during the in-school and six-month grace period, this grows by 23% to $106,283 by the end of the grace period. Over the 10-year repayment term, the parents make a total of $154,067 in loan payments. At the end of the 40-year period, they have $1,187,422 for retirement. That’s $60,047 less than the retirement savings in the first scenario.

Source: Mark Kantrowitz

*This number reflects the years that the Scenario #2 parents were unable to contribute their full $1,000 a month toward retirement because they were making loan payments ($480,000 – $154,067 = $325,933).

The only time borrowing for college costs is financially beneficial is when the interest rates on parent loans are lower than the equivalent long-term earnings rate on your investments. But that just doesn’t happen very often. True, private lenders are advertising parent loans starting at about 2%, but those are variable rates that are likely to rise over the years.

In early July of 2015, some lenders were offering parents fixed rates as low as 5.1%, but according to Morningstar, the average 529 investor has been earning total returns of only about 4% , even during the recent bull market, in part because funds for older students are parked in safe, but very low-yielding, bonds. And while retirement savers have been earning higher returns—typically about 10% a year over the last five years, according to Vanguard—those returns are not guaranteed in the future, and can vary dramatically depending on your timing. During any 17-year period, the S&P 500 is likely to drop by at least 10% at least twice.

So the next time a financial expert compares airplane safety briefings (where the flight attendant tells parents who are sitting next to a child to put their own oxygen masks on first) with whether to save for college or retirement, remember that the flight attendant isn’t paying for your child’s college education.

Unemployment among young adults has shrunk from 12.4% in 2010 to 7.7% early 2015, yet the share of millennials living independently has decreased in that time, from 69% in 2010 to 67% this year. The share of young adults living with their parents has increased in that same period from 24% to 26%.

The decline in the number of millennials living away from family reflects the decrease in independent living during the financial crisis. In the first third of this year, approximately 42.2 million millennials lived independently. In 2007 prior to the recession, about 42.7 million individuals in that age group lived on their own. In the years in between the population of 18- to 34-year-olds grew by 3 million.

In addition to shrinking unemployment, young adults are also experiencing higher rates of job-holding and full-time employment and are earning more per week now than they were just after the recession, yet the number of millennials heading their own households is no higher in 2015—25 million—than it was before the recession in 2007—25.2 million.

Pew says that these trends are not necessarily being driven by labor market fortunes since college-educated young adults have experienced a stronger labor market recovery than their lesser-educated counterparts, but the decline in independent living since the recovery began is apparent in young adults with a college education and those without one.

What’s certain is that millennials’ penchant for living at home is stifling the housing market come-back. “The growing young adult population has not fueled demand for housing units and the furnishings, telecom and cable installations and other ancillary purchases that accompany newly formed households,” Pew said.

Medicare provides coverage to one in six Americans, and federal officials look to find ways to trim the increasing cost and improve how the program operates.

Medicare, the federal health insurance program for the elderly and disabled, has come a long way since its creation in 1965 when nearly half of all seniors were uninsured. Now, the program covers 55 million people, providing insurance to one in six Americans. With that in mind, Medicare faces a host of challenges in the decades to come. Here’s a look at some of them.

Financing – While Medicare spending growth has slowed in recent years – a trend that may continue into the future – 10,000 people a day are becoming eligible for Medicare as the trend-setting baby boomers age. Yet the number of workers paying taxes to help fund the program is decreasing. That means Medicare will consume a greater share of the federal budget and beneficiaries’ share of the tab will likely climb. An abundance of proposals to curb federal expenditures on Medicare exist. They include increasing the eligibility age, restructuring benefits and cost-sharing, raising the current payroll tax rate and asking wealthier beneficiaries to pay more for coverage. Many Republicans have backed a “premium support” model — where the government would give beneficiaries a set amount of money to purchase coverage from a number of competing plans — as a way to limit Medicare spending. Democrats say premium support would undermine traditional Medicare and shift more of the program’s financial risk to beneficiaries. They favor other reforms in the program. By at least two-to-one margins, majorities of Democrats, Republicans and independents favor keeping Medicare as it is rather than changing to a premium support program, according to a recent poll from the Kaiser Family Foundation. (KHN is an editorially independent program of the foundation.)

Affordability — Most Medicare beneficiaries don’t have a lot of money and spend a large chunk of their finances on health care. Unlike many private health insurance plans, there is no cap on out-of-pocket expenditures in traditional Medicare, and the program does not cover services that many beneficiaries need, such as dental care and eyeglasses. (Private insurers that participate in Medicare Advantage may cover these and other items that traditional Medicare does not.) In 2013, half of all people on Medicare had incomes below $23,500 per person, and premiums for Medicare and supplemental insurance accounted for 42 percent of average total out-of-pocket spending among beneficiaries in traditional Medicare in 2010, according to an analysis from the Kaiser Family Foundation. Medicare does have some programs to help beneficiaries pay their Medicare expenses but the income limits can be as low as $1,001 per month with savings and other assets at or below $7,280 (limits are higher for couples).

Managing Chronic Disease — Illnesses such as heart disease or diabetes can ring up huge medical costs, so keeping beneficiaries with these conditions as healthy as possible helps not only the patients but also Medicare’s bottom line. An analysis from the Urban Institute finds that half of all Medicare beneficiaries will have diabetes in 2030 and a third will be afflicted with heart disease. Nearly half of the people on Medicare have four or more chronic conditions and 10 percent of the Medicare population accounts for 58 percent of spending. Reducing the rate of chronic disease by just 5 percent would save Medicare and Medicaid $5.5 billion a year by 2030 and reducing it by 25 percent would save $26.2 billion per year, the Urban Institute found. As beneficiaries age, many will want to remain in their homes and communities, requiring Medicare to identify ways to serve these beneficiaries as they face physical and cognitive impairments and meet their needs for more personal care, according to the Commonwealth Fund.

Delivery-System Reform — Medicare hopes to better manage beneficiaries’ needs by revolutionizing the way in which it pays for medical care. Federal officials have taken several steps to better coordinate and improve medical care, including implementing the health law’s requirement to reduce preventable hospital readmissions and form accountable care organizations, or ACOs, where doctors and others band together to care for patients with the promise of getting a piece of any savings. Another federal effort uses bundled payments, where Medicare gives providers a fixed sum for each patient, which is supposed to cover not only their initial treatment but also all the follow-up care. Last year, 20 percent of traditional Medicare spending — $72 billion — went to doctors, hospitals and other providers that coordinated patient care to make it better and cheaper. Department of Health and Human Services Secretary Sylvia M. Burwell has said that by the end of 2018 Medicare aims to have half of all traditional program payments linked to quality.

The Growth of Medicare Advantage — Enrollment in these private plans that offer alternative coverage is growing sharply. But the health law seeks to cut the rate at which the government reimburses insurers to make it closer to what it spends on beneficiaries in traditional Medicare. Nearly a third of beneficiaries are enrolled in Medicare Advantage plans. Many of the plans provide benefits beyond what traditional Medicare covers, such as eyeglasses and dental care, as well as lower out-of-pocket costs. But as federal payment rates decline the plans may become less generous. Another factor to watch is concentration in the Medicare Advantage market with just a handful of insurers now accounting for more than half of enrollment.